China’s Defense Budget Masks Higher Military Spending, Experts Say
China’s defense budget for the upcoming year has raised concerns among experts who believe that the official figure does not accurately reflect the country’s actual military spending. While the announced budget shows a 7.2 percent increase, analysts argue that there is a much larger boost in military capabilities as President Xi Jinping aims to strengthen the People’s Liberation Army (PLA) while reducing the cost of weapons acquisition.
According to Tai Ming Cheung, director of the Institute on Global Conflict and Co-operation at the University of California San Diego, Xi has been emphasizing the need for defense modernization and reforms that enable the economy to support a wartime footing. This indicates a requirement for more resources rather than less. International analysts agree that China’s total military expenditure exceeds its official defense budget, as it does not include expenses for military research and development, certain procurement, paramilitary forces, and the coastguard.
Nan Tian, a researcher at the Stockholm International Peace Research Institute, estimates that China’s total military spending is about 30-35 percent higher than the official budget. Cheung, who has extensively studied China’s defense-industrial complex and military procurement, suggests that after years of research and development, production of various systems such as missiles, fighter jets, and warships is now accelerating. This implies a need for increased spending outside of the official defense budget, potentially at a double-digit year-on-year growth rate.
President Xi’s plans to strengthen China in its competition with the United States have gained prominence over the past year. In a speech to military delegates of the National People’s Congress, Xi outlined his vision of building an integrated national strategic system and capabilities. This concept of “civil-military integration” goes beyond pooling military and civilian resources and extends to strategic capabilities across the entire economy.
However, with China’s economy experiencing a slowdown, Xi’s goal of bolstering the military must be balanced with efforts to reduce procurement costs. Lyle Morris, a senior fellow at the Asia Society Policy Institute’s Center for China Analysis, explains that the PLA does not have a blank cheque due to the country’s economic challenges. As a result, the Chinese leadership is working to revamp the military-industrial complex and accelerate the development of high-quality, high-efficiency, high-speed, and low-cost military equipment.
State-owned defense contractors have been emphasizing the need for low-cost systems, highlighting the widening gap between the armed forces’ procurement needs and the available budget. The China Aerospace Studies Institute and brokerage China Galaxy Securities have both reported on this gap, particularly in relation to the Air Force and the Rocket Force. These two services are expected to see a 30 percent annual growth in equipment procurement in the next five years.
Chinese and international military experts believe that China’s transformation of its military capabilities has been accelerated by observing Russia’s actions in the war in Ukraine. The prolonged conflict has demonstrated the need for larger quantities of munitions and other gear than initially anticipated. As a result, the PLA is instructing suppliers to increase production to compensate for lower prices and maintain profitability.
Roderick Lee, research director of the China Aerospace Studies Institute, predicts a significant expansion of China’s defense industrial base beyond the current Five Year plan. This expansion will likely result in high volumes of low-cost missiles and other systems in the future.
In conclusion, while China’s official defense budget may not accurately reflect its actual military spending, experts argue that there is a significant boost in military capabilities. President Xi’s focus on defense modernization and reforms, coupled with the need to balance economic challenges, has led to efforts to pursue low-cost military equipment. China’s transformation of its military capabilities is in full swing, driven by observations from conflicts such as the war in Ukraine. As China continues to strengthen its military, the world will be closely watching its evolving capabilities and the potential implications for global security.
